Stock splits: The strange exception where a lower stock price can be better for investors

FILE - A sign for a Nvidia building is shown in Santa Clara, Calif., May 31, 2023. A lower stock price can actually be a boon for investors in some rare cases. When companies announce splits to their stocks, as Nvidia recently did, they have historically gone on to beat the broad market in the next year. Though a stock split doesn’t guarantee an ensuing rise in price.

Nvidia said it’s making the move to make its stock price more affordable for its employees and for other investors. An investor may be more willing to buy a stock with a $100 price tag than one that costs $1,000, even if some brokerages allow investors to buy fractions of a company’s share. Tesla was one of the 30% of companies that announced stock splits that saw their share prices drop in the ensuing year. A few outliers that did particularly well, such as Copart’s 56% following its October 2022 announcement, also helped drive up the overall numbers.

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